09 May 2018

I rise to speak on the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017 and the Telecommunications (Regional Broadband Scheme) Charge Bill 2017 and I move the amendment as circulated in my name:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House:

(1) is of the opinion the internet tax proposed in this package of bills is a direct consequence of the Prime Minister deploying a second-rate NBN that:

   (a) costs more to deploy;       

   (b) delivers slower speeds;

   (c) will cost more to maintain;

   (d) will require expensive upgrades in the future;

   (e) is more exposed to wireless competition; and

   (f) generates less revenue from those willing to pay;

(2) notes the cost of the multi-technology mix increased from $29.5 billion to $41 billion in December 2013;

(3) notes the cost of the multi-technology mix increased from $41.0 billion to $49 billion in August 2015;

(4) notes taxpayers were forced to step in with a $19.5 billion loan after NBN Co failed to secure private debt funding;

(5) notes that the Turnbull Government wants to give big business an $80 billion tax cut, as it seeks to introduce new internet taxes on households;

(6) notes the Turnbull Government, in rejecting fibre, is creating a digital divide in Regional Australia; and

(7) calls on the Government to stop punishing consumers and taxpayers for its NBN failures".

I wish to say from the outset that Labor endorses schedule 3 of this bill. The proposed statutory infrastructure provider regime will offer certainty in that, as we move beyond the initial NBN rollout, every Australian home and small business can continue to access high-speed broadband infrastructure. This proposes to legislate an important reform that was first initiated by Labor almost a decade ago. Broadband is about liberating social opportunity and economic growth, two engines of the modern Labor Party. It is for this very reason that we on this side of the House understand that access to high-speed broadband should not be a luxury or a random suburban lottery. Rather, it should be a fundamental right. In the information age, if opportunity does not begin in the home or in the classroom, then it simply does not begin anywhere. Without equality of opportunity, you are selling the nation short on economic growth.

When the NBN was established, the policy objective of universal access was implemented through a statement of expectations issued to the NBN Co board. This, in turn, required the company to make the network accessible to all Australians as part of its rollout. It took those opposite many years to come to the party and sign up to the concept of a ubiquitous national broadband network. They resisted but, in the end, they had no choice. The Australian public gave them no choice. So we can take a measure of satisfaction in having fought for and reached this point. The statutory provider obligations may improve outcomes for small businesses setting up in new estates and commercial precincts. Coming from a local government background and a telco regulatory background, I—and Labor—appreciate that we need to improve the coordination between developers and infrastructure providers to ensure connectivity is available and ready for businesses to use once they are ready to start trading. I and my colleagues receive too many complaints about this problem and its impact, particularly on small businesses.

This is an area where all tiers of government can continue engaging with the objective to improve the consistency of arrangements across states and developers. This comes back to the basics: early and consistent communication between developers and infrastructure providers to ensure the necessary planning and contracts are in place for the supply of communication services. Hopefully, schedule 3 can be a platform to build on previous discussions and the new development's policy. I also acknowledge the good work of those industry and consumer stakeholders who have advocated for the design of the statutory infrastructure provider regime. Amid the robustness of the public NBN debate, the important work of establishing a policy framework that places consumers at the centre must continue.

I now wish to turn to schedule 4 of this bill, which proposes the introduction of an NBN levy. It is telling that, in the week of the federal budget, the Turnbull government is seeking to pass a broadband tax that is expected to raise nearly half a billion dollars over the next decade. This levy is expected to add $84 to the annual broadband bill for the homes and businesses on non-NBN networks subject to this tax. Estimates of the number of services affected by this levy range from 240,000 to 450,000. Let me make this clear from the outset: Labor considers this levy to be poorly designed and the targeting of particular networks to be arbitrary, and the need to now even contemplate its existence in this place is highly regrettable.

There is only one reason we have arrived at this point, and that is the poor judgement of this Prime Minister. In 2009, the then Labor government decided to build a national broadband network that would extend universal coverage of broadband to regional and remote Australia—seven per cent of the population—through a combination of fixed wireless and satellite technologies. This was a critical initiative—one which we and the Australian public endorsed as absolutely necessary. This decision to extend high-speed broadband to unprofitable areas was funded through a universal wholesale pricing regime. In short, this meant NBN users in the cities would cross-subsidise higher-cost services in the regions that the private sector would otherwise neither invest in nor serve. This framework was achieved through a universal wholesale access price that was approved by the ACCC. Having a universal wholesale pricing regime with a levy coming in later over the top was not contemplated. The consideration was that you have either one or the other but not both.

Since that time, the cost of the fixed wireless and satellite rollout has not changed from what was expected. However, the technology composition of the NBN and its revenue potential have changed. We now have an inferior multi-technology mix, which, according to NBN Co's own analysis, will cost at least $200 million more per annum in steady state to maintain and operate and will generate $300 million less per annum in revenue relative to a fibre-to-the-premises network. That's a $500 million earnings gap. On top of this, in August 2017, roughly 300,000 homes—an estimated 220,000 of which would have been revenue generating—disappeared off the NBN business plan, yet cumulative capital expenditure forecasts for rollout completion increased by 1.4 billion from the year before. This would suggest taxpayers are spending the same, or possibly more, for the NBN to serve fewer connected homes. That is another $140 million per annum in revenue that's not coming back.

The proposed broadband levy before this parliament is a consequence of the failures of a government that consistently gets the big calls wrong. It is an admission that the economics of the multi-technology mix have deteriorated. The Prime Minister knew there was no way he could deliver the NBN for $29 billion by the end of 2016. He then promised to deliver it for $41 billion, but that promise also came and went. We now have a $49 billion multi-technology mix whose long-term economics differ markedly from a fibre rollout. This second-rate network costs more to maintain, delivers slower speeds and will require expensive future upgrades that could have been avoided. Furthermore, the NBN has less revenue potential and the multi-technology mix is more exposed to wireless competition. NBN Co recently confirmed that, for every one per cent loss of market share to mobile competitors, the business case could forego up to $1.5 billion in revenue over the life of the project. In April this year, the CEO of Telstra estimated one million more consumers than the number today could substitute wireless for NBN. If that number were to materialise at some point in the future, it could reduce NBN's market share to 65 per cent. Critically, for the taxpayer, none of these costs or risks are reflected in the $49 billion price tag. In addition, it is questionable whether the extent of these risks is adequately reflected in the projected internal rate of return. In contrast, fibre would have preserved an indefinite performance and reliability edge for decades to come. But the copper being deployed by this government has already ceded that edge.

It is also worth noting that, prior to the 2013 election, the now Prime Minister was encouraging companies to invest in fixed line infrastructure and bypass the NBN. By encouraging fixed line providers to bypass the NBN, particularly given the significant public investment that was being made, this Prime Minister scored an own goal. His poor judgement has undermined NBN Co's revenue streams that would otherwise have improved the capacity of the company to support services for regional consumers and delivered a better return for taxpayers. The Prime Minister understood that what he was advocating for would actually undercut the NBN business model. He understood this very clearly, but that seemingly didn't matter to him in 2013. As a prospective incoming shareholder minister, his desire to see the NBN undermined by competitors was both disappointing and contrary to the public interest.

It was no coincidence that TPG announced some 10 days after the 2013 election that it planned to deploy a fibre-to-the-basement network to up to half a million premises that NBN intended to serve. Networks expanded, investments were made and the revenue sensitivities of the NBN business case became more acute. The cost of the NBN increased from $29 billion to $41 billion in late 2013. By August 2015, the cost of the multitechnology mix had again blown out by a further $8 billion. Leaks revealed the cost of remediating the copper network had increased tenfold to over $600 million. Come 2017, retail service providers were sanctioned for charging customers for speeds the copper NBN could not deliver. Statements released by the ACCC indicated that one in two customers on the top-speed tiers had their speeds downgraded and were being compensated as a result.

The Senate has established that no funding has been set aside in the NBN business case out to the year 2040 to upgrade the copper footprint. Put another way: the already precarious economics of the NBN business case operate on the assumption that Australians won't need their copper connection upgraded for at least another 23 years. The chief NBN engineer apparently doesn't believe this, telecommunications experts don't believe this and the Australian public wouldn't accept this, yet that is the assumption underpinning the government's NBN business case.

Then, in late 2017, the HFC rollout was brought to a halt due to ongoing reliability issues and service dropouts. Leading up to this period, the NBN CEO was giving radio and television interviews arguing for a new tax on mobile services. More recently, it was revealed that NBN put a secret proposal to the government to dump the entire HFC network. This is hardly surprising given the cost of the Prime Minister's HFC rollout and its increase by almost $2 billion over recent years. This is a collective measure of the difficult times we are in. It is the consequence of an expensive multitechnology mix that remains as confused and incoherent in 2018 as it was in 2013. But I do wish to observe that, more broadly, the fact that we are standing here in the House today debating the introduction of a new broadband levy being proposed by the government while we have a universal wholesale pricing regime that will deliver a regional cross-subsidy of over $700 million per annum by 2021, in conjunction with a $300 million per annum universal service obligation—which remains in need of reform, by the way—underscores the need for a more holistic and coherent approach to communications policy in Australia. This government has been nothing short of hopeless on this front.

Turning to the specifics of the bill, it is the view of Labor that the primary benefit of the proposed levy charge is that it would, in effect, introduce a price signal that deters the inefficient duplication of fixed line infrastructure and deters cherrypicking of profitable parts of the NBN footprint. Simply put, it places NBN on a more level playing field. It is appropriate to ensure there is a level playing field so that fixed-line operators competing in areas NBN intends to serve or is serving or those who are considering deploying infrastructure to compete directly with NBN down the track understand they would not have a structural competitive advantage, because NBN has to embed a regional cross-subsidy into its pricing. So it is appropriate that NBN Co should be able to compete on a level playing field.

What is important is that we are also clear about what the playing field actually is. Measures that aim to achieve a level playing field should not stray into already well-served markets where NBN is not obliged to invest its capital. The somewhat desperate inclusion of enterprise networks in this levy falls into this category. If NBN Co want to compete for business and enterprise revenue, that is fine and we wish them luck. Naturally, applying the lens of a shareholder, having NBN do well in the business segment is good for the company and some of those benefits may indirectly spill over to consumers. However, we should not begin taking policy settings from the residential footprint where interventions were addressed at a market failure and then apply those settings in enterprise markets where such failure did not exist. Optus summarised this well in its submission to the inquiry on this bill where it stated:

… there is a need to distinguish between NBN Co's … monopoly services and its future plans to deploy services in contestable nonresidential markets.

Their submission went on to say:

Contestable services are services in competitive markets. We are aware that NBN Co may have future plans to deploy services in this area; however, in doing so it will be entering an existing competitive market and competing with existing commercial services.

And it goes on:

There are no cease sale or separation obligations for these services because there was no evidence of market failure that necessitated NBN displacing these existing networks.

The retrospective application of this levy to existing greenfield networks is also deeply concerning, as these are areas where, again, NBN Co has not invested capital and is not required to serve. NBN are free to compete with business for business in greenfield areas—and, again, we wish them well. However, investments in greenfield networks often operated by companies who are more modest in their size have been made up to this point based on certain regulatory assumptions. This government is proposing to move those goalposts, which does now happen in public policy. Nonetheless, the proposed retrospective application of the levy to areas where NBN and a greenfield operator are not competing directly for the same customer is a cause for concern. As OptiComm stated in their submission to the Senate inquiry into this draft legislation, the proposed levy charge is 100 times the per service contribution that telecommunications companies currently make to fund the universal service obligation.

Ultimately, it's the Prime Minister who owns this proposed levy. It is for this Prime Minister to explain why this government wants to give big business an $80 billion tax cut while introducing a new telecommunications charge that will add at least $84 to the annual broadband bill of impacted households on non-NBN networks. And it is for the Prime Minister to explain why it is always the consumer and the Australian taxpayer who are being asked to pay for his NBN failures time and again.

Regional Australians know that, when it comes to broadband, only Labor will consistently deliver on their behalf because Labor believes in the NBN. For over 11 years, John Howard and the Nationals did nothing to advance the cause of broadband in the regions. In the period that followed, we have made good progress in improving the quality of regional communications infrastructure, but more remains to be done. Labor will continue to place regional consumers and equality of access front and centre of our policymaking.

I want to turn now to the carrier separation rules and touch briefly on these rules contained in schedules 1 and 2. The superfast network rules in parts 7 and 8 of the Telecommunications Act were introduced in 2011 and apply to superfast fixed-line networks servicing residential and small business customers. As noted in the explanatory memorandum, part 7 requires operators of such networks to supply a layer 2 bitstream service to access seekers. Part 8 requires the networks to be wholesale only—that is, structurally separated.

The bill proposes several amendments to make the default structural separation requirement clearer and more effective as a baseline for the industry, while at the same time creating new commercial opportunities. These amendments reset the structural separation arrangements and establish some flexibility for functional separation arrangements, subject to ACCC oversight. As the competition and consumer regulator, the ACCC is well placed to perform this role and exercise judgements about the instances in which permitting functional separation will serve the long-term interests of end users. On this basis, Labor supports schedules 1 and 2. The grandfathering arrangements, which propose to amend part 8 such that the current wholesale-only obligations in section 143 of the Telecommunications Act will generally apply to high-speed networks that came into existence between 1 January 2011 and 30 June 2018, appear sensible. So it follows that the proposed section 142C would apply the new structural separation or functional separation rules to local access lines that come into existence after 1 July 2018.

In summary, Labor supports schedules 1 and 2. We will support their passage, as with schedule 3, the statutory infrastructure provider regime, which we welcome, and we will not be opposing schedule 4 here today. I circulate the amendment standing in my name.